Federal Reserve Chairman Ben Bernanke addresses a luncheon gathering of The Economic Club of New York on Nov. 20. / Richard Drew, AP

by Paul Davidson, USA TODAY

by Paul Davidson, USA TODAY

The Federal Reserve is expected to take another step Wednesday to stimulate the lackluster recovery by agreeing to buy more Treasury bonds to push down long-term interest rates.

Fed policymakers meet for two days, Tuesday and Wednesday. They also could approve new strategies for communicating to the public and financial markets when they expect to raise a benchmark short-term interest rate, now near zero.

The effectiveness of the communication is important because it can affect rates even before the Fed takes any action.

Both initiatives are aimed at keeping borrowing costs low for consumers and businesses, thereby spurring more purchases of homes, cars and factory equipment to speed economic growth.

The modest job growth reported by the Labor Department on Friday underscores two things: The decision to buy Treasuries will likely be an easy call, while fine-tuning the communication strategy may be trickier.

In September, the Fed said it plans to continue buying government bonds until the labor market improves "substantially." At that time, policymakers announced the purchase of $40 billion a month in mortgage-backed securities, largely to lower mortgage rates for home buyers.

Meanwhile, a separate program, known as Operation Twist, to purchase $45 billion a month in long-term Treasuries and sell a similar amount of short-term notes ends this month. Since the Fed doesn't have enough short-term Treasuries left in its portfolio to keep the program going, many economists expect the Fed to simply continue snapping up $45 billion a month in long-term Treasuries, in addition to its purchases of mortgage-backed securities.

San Francisco Fed President John Williams, a voting member of the Fed's policy-setting committee, said last month he favors that approach.

Yet, Treasury purchases without offsetting sales would expand the Fed's bond portfolio, pumping more cash into the economy but also making it more difficult to eventually sell the bonds to head off inflation. In a recent speech, St. Louis Fed President James Bullard, a non-voting member of the committee, said outright purchases are "more potent" and buying less than $45 billion a month in notes "would keep policy unchanged."

Tim Duy, author of the Fed Watch blog and a University of Oregon economics professor, anticipates $25 billion to $40 billion in monthly purchases.

Fed policymakers also have said recently they favor citing economic thresholds to signal when they plan to raise short-term interest rates. In recent months, they've said they expect rates to stay near zero until at least mid-2015. But Bullard says that's inadequate, because financial markets realize the date could change due to economic conditions.

Bullard and other Fed members, instead, suggest setting thresholds of 6.5% unemployment and 2.5% annual inflation for when the Fed would consider raising rates. Bullard, however, said investors may misinterpret the thresholds, believing they would automatically force rate increases even if other economic data are weak.

Last month, for example, unemployment fell not because of job growth but because 350,000 people stopped working or looking for work as Baby Boomers retire.